Tax or trade, the war on carbon pricing has been raging for decades

Author

PhD candidate at Sustainable Consumption Institute , University of Manchester

Disclosure statement

Marc Hudson does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond the academic appointment above.

The Coalition government has revived its anti-carbon tax campaign in the wake of Labor’s commitment to bring back an emissions trading scheme and increase the contribution of renewable energy to 50% by 2030.

This was superseded when Australia agreed a less onerous target - stabilisation at 1990 levels by 2000 - at the June 1992 Rio Earth Summit.

In 1991 carbon taxes and trading schemes were discussed in government working groups on ecologically sustainable development.

In 1992 the environment department released a report on tradeable emissions, which examined the feasibility of a global permit scheme, and “the use of such an instrument within Australia”.

Most ominously the government’s Industry Commission (a forerunner of the current Productivity Commission) also mooted emissions trading or taxation as a way to meet Australia’s emissions goals.

Business backlash

These discussions alarmed business. BHP, CRA (the forerunner to Rio Tinto), Shell, the Australian Coal Association and the Australian Mining Industry Council (now the Minerals Council of Australia) commissioned economic modelling that warned a carbon tax of A$153 per tonne would be needed to achieve the Toronto target. The headline to an article by the general secretary of the miners’ union captured the tone - “Carbon Tax Spells Disaster for Our Industry”.

By mid-1994 it was clear that Australia would struggle to reach even its Rio target of stabilising emissions at 1990 levels. Environment minister John Faulkner took a proposed emissions trading scheme to cabinet under Labor Prime Minister Paul Keating.

A compromise programme of voluntary actions, the Greenhouse Challenge, was designed in collaboration with big polluters, and so toothless it survived the transition from Keating to Liberal Prime Minister John Howard.

enabled Howard to embrace emissions trading but allowed Australia’s emissions to grow indefinitely… Everyone else would pay more for electricity, but the worst offenders would get off the hook…

Howard’s end was in sight, however, and Kevin Rudd swept to power, ratified the UN’s Kyoto Protocol and promised to deal with what he had called “the great moral challenge of our generation”.

However, Rudd and his environment minister Penny Wong became bogged down in a Green Paper, a White Paper and two failed attempts to get increasingly unpopular legislation through parliament. The Carbon Pollution Reduction Scheme lost green support because of the compensation it offered to large polluters and the free permits that were to be allocated.

Carbon taxes defeated, but at what cost?

As the price of Green Party support in forming a minority government, Julia Gillard had to introduce an emissions trading scheme, which led to prolonged and well-funded public campaigns by mining interests and others to defeat the scheme.

Australia has been talking about pricing carbon for a generation. It’s in this context that we should understand the reporting of journalists such as Laura Tingle, who writes about the costs of reaching emissions reductions via the government’s Direct Action policy:

if the proposed reductions were only being delivered by the business subsidies offered through the emissions reduction fund, the cost to taxpayers would be hundreds of millions of dollars a year, possibly hundreds of billions by 2030.

The battles against emissions trading and carbon taxes were won, but it was the mother of all own goals.

Marc will be one hand for an Author Q&A between 2:30 and 3:30 pm on Thursday, August 13. Post your questions in the comments section below.